Your employer is correct that PFL is not taxable in California. HOWEVER, true PFL is paid for by the California EDD (Economic Development Department) through a 1099-G, or by an insurance company engaged by your employer through a separate W-2. Many employers throw what they call "PFL" on the W-2 and it isn't tax-free PFL at all.
Please see "What is Paid Family Leave (PFL)?"
In the course of my tax work, I have seen dozens of taxpayers gets dinged for thousands of dollars in tax for taking what they thought was PFL, the State said it wasn't.
I would encourage to read the link above, then contact the CA EDD to see if they think that what you have received is true EDD.
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